Publication

This paper applies principles of the New Neoclassical Synthesis to questions of international trade and financial adjustment. The analytical framework is a 2-country, 2-good, 2-period model designed to explore the behavior of the balance of payments, the terms of trade, and aggregate fluctuations in terms of interest rate and exchange rate policies practiced by the world's most important central banks. The author concludes that the International New Neoclassical Synthesis model with its International Real Business Cycle core helps to understand the susceptibility of a fixed exchange regime to speculative attack.